VANCOUVER, BC, Aug. 10,
2022 /CNW/ - (TSX: AOI) (Nasdaq-Stockholm: AOI) –
Africa Oil Corp. ("Africa Oil", "AOC" or the "Company")
announces its financial and operating results for the three and six
months ended June 30, 2022. View PDF
version.
Highlights
- The Company received two dividends from its shareholding in
Prime, totaling $62.5
million1 in Q2 2022 ($162.5 million in H1 2022); since its acquisition
of a 50% shareholding in Prime in 2020, the Company has received an
aggregate dividend amount of $562.5
million, representing 108% of the closing cash payment.
- Cash balance at June 30, 2022, of
$191.0 million (at December 31, 2021 - $58.9
million), with no debt outstanding and an undrawn corporate
facility of $100 million.
- Prime has made amendments to its hedging strategy to provide
greater scope for retaining price upside, while protecting price
downside risk for 50%-70% of its oil entitlement over a 12-month
rolling period.
- Selected Prime's results net to Africa Oil's 50%
shareholding*:
-
- in Q2 2022, record FCF/boe of $52.8 (Q2 2021 - $30.9)6 due to higher oil prices;
- cash position of $330.6 million
and gross debt balance of $501.0
million at June 30, 2022
(Prime net debt to Africa Oil of $170.4
million), which combined with the $191 million cash balance at the Africa Oil
corporate level results in a net cash position of $20.6 million; this also gives a robust Net Debt
to EBITDAX7 ratio for the twelve months ended
June 30, 2022, of 0.3x (twelve months
ended December 31, 2021 – 0.4x);
- average daily W.I. production of 25,300 boepd and economic
entitlement production of 27,350 boepd (82% light and medium crude
oil and 18% conventional natural gas) in Q2 2022 (Q2 2021: 28,000
boepd and 30,300 boepd respectively)3,4,5;
- in Q2 2022, EBITDAX7 of $127.1 million (Q2 2021 - $155.6 million);
- in Q2 2022, cash generated from operating activities of
$130.0 million (Q2 2021: $92.9 million, excluding $152.5 million relating to the receipt of the
Agbami Security deposit); and
- historical payments relating to Gas Sales Purchase Agreement of
$112.0 million received in H1 2022,
and the payments are now regularized.
Africa Oil President and CEO Keith
Hill commented: "I am pleased to announce another robust
quarter that has led to further strengthening of our now debt-free
balance sheet with a cash balance of $191
million. Our shareholders can look forward to a busy second
half of the year of catalysts including the expected license
extension in Nigeria and
refinancing of Prime's RBL debt facility; the two-well Venus
appraisal program; the Gazania-1 exploration well; and the
potential farm-out of Project Oil Kenya."
_____________________________
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* Important
information: Africa Oil's interest in Prime is accounted for as an
investment in joint venture. Refer to Note 2 on page 5 for further
details. Please also refer to other notes on page 5 for important
information on the material presented.
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2022 Second Quarter Financial Results
(Thousands
United States Dollars, except Per Share and Share Amounts)
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June 30,
2022
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December 31,
2021
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Cash and cash
equivalents
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191,040
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58,885
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|
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|
|
|
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Total assets
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1,036,359
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991,618
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|
|
|
|
|
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Debt
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-
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-
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|
|
|
|
|
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Total
liabilities
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44,994
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43,560
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Total equity
attributable to common
shareholders
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991,365
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948,058
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|
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|
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|
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Three months
ended
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Three months
ended
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Six months
ended
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Six months
ended
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June 30,
2022
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June 30,
2021
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June 30,
2022
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June 30,
2021
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Share of profit from
investment in joint
venture
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14,350
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48,564
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65,355
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97,378
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Share of (loss)/profit
from investment in
associates
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(1,054)
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(1,205)
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1,679
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(2,090)
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Total operating
income
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13,296
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47,359
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67,034
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95,288
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Net operating
income
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6,369
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44,133
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53,158
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88,339
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Net income
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5,653
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38,384
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51,261
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77,304
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Net income per share -
basic
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0.01
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0.08
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0.11
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0.16
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|
|
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Net income per share -
diluted
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0.01
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0.08
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0.10
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0.16
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Weighted average number
of share
outstanding - basic ('000s)
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477,166
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473,253
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476,155
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472,703
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Weighted average number
of share
outstanding - diluted ('000s)
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490,562
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476,398
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489,384
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475,848
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|
|
|
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Number of shares
outstanding ('000s)
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477,281
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473,360
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477,281
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473,360
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Cash flows used in
operations
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(5,341)
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(3,080)
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(10,121)
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(6,922)
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Cash flows provided by
investing
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56,309
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32,525
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155,641
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30,623
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Cash flows used in
financing
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(621)
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(23,785)
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(13,433)
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(29,073)
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Total change in cash
and cash equivalents
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50,433
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5,655
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132,155
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(5,384)
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Total change in
equity
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5,817
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44,504
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43,307
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72,427
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The financial
information in this table was selected from the Company's unaudited
consolidated financial statements for the three and six months
ended June 30, 2022. The Company's consolidated financial
statements, notes to the financial statements, management's
discussion and analysis for the three and six months ended June 30,
2022, and 2021, and the 2021 Report to Shareholders and Annual
Information Form have been filed on SEDAR (www.sedar.com) and are
available on the Company's website
(www.africaoilcorp.com).
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FINANCIAL POSITION AND EARNINGS
The Company recognized a total operating income of $13.3 million and net income of $5.7 million during the second quarter of 2022.
The operating income primarily relates to the Company's share of
profit from its investments in Prime amounting to $14.4 million.
The Company ended first quarter 2022 with cash of $191.0 million in comparison to cash of
$58.9 million at the end of 2021. The
Company has no outstanding debt. During second quarter 2022, Prime
paid two dividends for aggregate distribution of $125.0 million with net payment to Africa Oil of
$62.5 million, related to its 50%
shareholding interest. Since the acquisition of a 50% shareholding
in Prime in January 2020 for
$519.5 million, the Company has
received 13 dividends from Prime for a total amount of $562.5 million, representing 108% of the closing
purchase price.
On January 31, 2022, the Company
announced that all lenders to its Corporate Facility had approved
increasing the available amount to $100.0
million from the then unutilized amount of $62.0 million, and extending the availability
period to December 31, 2022, from
May 13, 2022. The Corporate Facility
maturity date of May 13, 2024 and
interest margins were unchanged.
On February 28, 2022, the Company
announced that its Board of Directors had declared an initial
aggregate annual dividend of $0.05
per share (approximately $24.0
million) to be paid semi-annually, with the first payment
payable on March 31, 2022, to
shareholders of record at the close of business on March 17, 2022.
PRIME'S SECOND QUARTER 2022 PERFORMANCE
Prime's second quarter 2022 average daily working interest
("W.I.") production was 25,300 boepd and economic entitlement
production was 27,350 boepd (82% light and medium crude oil and 18%
conventional natural gas), net to Africa Oil's 50% shareholding in
Prime. These compare to second quarter 20215 average
daily W.I. production of 28,000 boepd and economic entitlement
production of 30,300 boepd (84% light and medium crude oil and 16%
conventional natural gas), net to Africa Oil's 50% shareholding in
Prime. Year to date field performance has been at the higher end of
expectation and the full year production outlook remains within the
management guidance range for both W.I. production (22,500 – 25,500
boepd) and economic entitlement production (23,000 – 27,000
boepd).
During the second quarter 2022, Prime was allocated 3 oil
liftings with total sales volume of approximately 3.0 million
barrels or 1.5 million barrels net to Africa Oil's 50%
shareholding.
Prime achieved an average realized oil price of $77.1/bbl in Q2 2022 (Q2 2021: $58.4/bbl) including premium adjustments. Two
additional cargos were sold in July
2022 for an average price of $103/bbl including premium demonstrating the
upside price exposure under the revised hedging policy.
Prime achieved second quarter 2022 sales revenue of $176.4 million (Q2 2021: $125.0 million9); EBITDAX of
$127.1 million (Q2 2021: $155.6 million) and cash flow generated from
operating activities of $130.0
million (Q2 2021: $245.4
million8, including $152.5
million relating to the receipt of the Agbami Security
deposit), in each case net to Africa Oil's 50% shareholding.
As at June 30, 2022, net to the
Company's 50% shareholding, Prime had $330.6
million of cash and debt of $501.0
million (at December 31, 2021:
$258.9 million of cash and debt of
$508.4 million).
The debt outstanding has decreased slightly following gross
repayments on the RBL Facility of $164.8
million which net off a drawdown on the PXF Facility of
$150.0 million. Net to the Company's
50% shareholding, the overall debt has reduced by $7.4 million during H1 2022. The next repayment
under the RBL facility will not occur until September 2022. The PXF repayments will also
begin in September 2022.
At June 30, 2022, Prime has a Net
Debt of $340.8 million (at
December 31, 2021 – Net Debt of
$498.9 million) and a Net
Debt/EBITDAX of 0.3x for the twelve months ended June 30, 2022, (0.4x for the twelve months ended
December 31, 2021). The strength of
this ratio demonstrates the low leverage within Prime compared with
industry peers. This strong Net Debt/EBITDAX ratio, combined with
the full repayment of the Company's Corporate Facility in 2021
means the Company and Prime are well placed to raise more debt in
the future if required. Net Debt/EBITDAX is a non-GAAP measure and
a reconciliation is performed on page 13 of the MD&A.
Prime's Supervisory Board have approved a new hedging strategy
with a 50% - 70% coverage target for the next 12-month scheduled
cargoes on a rolling basis. Under this new strategy, Prime gives an
irrevocable instruction to an offtaker to fix the Dated Brent
component of a cargo when the forward curve price goes below a
trigger of circa 80% of the Brent forward curve (at the time when
the instruction was given) for the month of the expected lifting.
Otherwise, the cargo is sold on a spot basis. For instance, the
most recent forward sale (in Aug-22) was set with a trigger of
$85.0/bbl. This means that if the
forward curve drops to $85.0/bbl for
the month of the forecast cargo, the forward sale price would be
locked in. If the forward curve does not drop to $85.0/bbl up to 31 days before the cargo is
lifted, then Prime would sell on a spot basis. This policy allows
Prime to retain price upside, while securing a minimum oil price
for 50% to 70% of its oil entitlement.
DIVIDENDS
The Company is committed to a sustainable dividend policy over
the future years. The second dividend distribution for 2022 of
$0.025 per share is payable on
September 30, 2022, to shareholders
of record at the close of business on September 9, 2022. This dividend qualifies as an
'eligible dividend' for Canadian income tax purposes.
Dividends on shares traded on TSX will be paid in Canadian
dollars on September 30, 2022.
Dividends on shares traded on Nasdaq Stockholm will be paid in
Swedish kroner in accordance with Euroclear principles on
October 4, 2022. To execute the
payment of the dividend, a temporary administrative cross-border
transfer closure will be applied by Euroclear from September 8, 2022, up to and including
September 9, 2022 during which period
shares of the Company cannot be transferred between the TSX and
Nasdaq Stockholm.
OUTLOOK
The Company's debt-free balance sheet, its share of Prime's cash
flows and access to debt funding on competitive terms, supports a
range of opportunities for the Company to achieve accretive growth
and create shareholder value. The Company's valuation is
underpinned by its 50% shareholding in Prime, which accounts for
all of the Company's reserves and production interests.
The Company will work to maximize Prime's dividends by
distributing its excess cash, whilst maintaining a prudent treasury
management policy at Prime. The near-term priority is to extend
Prime's debt tenor with the primary objective of refinancing
Prime's RBL facility, possibly facilitated by the early conversion
of Prime's licenses in Nigeria to
the new Petroleum Industry Act ("PIA") terms. The Company's
management will also work with Prime to assess other financing
options that could extend Prime's debt maturity profile on
competitive costs, such as the PXF Facility that was arranged by
Prime in 2021.
Prime and its upstream partners are currently working on the
early renewal of OML 127 and OML 130 licenses and consequent
conversions to the PIA terms. It is expected that OML 130
conversion and renewal, which accounts for most of the reserves,
production and value in Prime's portfolio can be delivered by end
of 2022, although a successful outcome on this timeline can't be
guaranteed. It is further expected that a successful early
conversion and renewal of OML 130 could provide the basis for
concurrent refinancing of Prime's RBL debt.
Furthermore, a conversion and renewal of OML 130 could
facilitate the final investment decision for the Preowei oil
discovery. Preowei oil field is to the north of Egina FPSO and is a
low-risk development opportunity through a satellite subsea
tie-back project to the Egina FPSO.
Fast track processing of the data from the 4D seismic survey
completed over Egina in Q4 2021 is now complete and infill drilling
targets have been confirmed. Infill drilling was initially expected
to commence mid-year 2022, however this has been delayed until late
in Q4 2022 due to the late arrival of the rig. First production
from the infill drilling campaign is now not expected until Q1
2023. To offset the impact of the delayed drilling campaign, the
operator has identified 4 well intervention opportunities in OML130
which are expected to be executed during Q3 2022.
In 2021, the Company and its partners initiated a farm-out
process for Project Oil Kenya. Advanced discussions are on-going
with the interested parties. A successful farm-out is viewed by the
Company as a critical step towards the FID for Project Oil Kenya
being achieved over the course of the next year. There is no
guarantee that the Company can successfully conclude a farm-out to
new strategic partner(s) on favorable terms.
In Q1 2022, the Company's investee company, Impact, made a major
light oil discovery with the Venus 1-X exploration well on Block
2913B, offshore Namibia.
The Venus discovery is a light oil and associated gas field,
sitting approximately 290 kms off the Namibian coast. The Venus-1X
discovery well was drilled by TotalEnergies on behalf of the joint
venture group comprising TotalEnergies (40%), QatarEnergy (30%),
Impact (20%) and state owned NAMCOR (10%).
An appraisal well and a re-entry into Venus-1X is being planned,
with spud expected in Q3 2022. The operator plans to conduct flow
tests on both wells.
Venus, together with the nearby Graff-1 discovery on the
adjacent Block 2913A (the Company has no interest in this block),
herald the opening of a major petroleum province in the Orange
Basin with significant upside potential for the Company. As well as
the immediate significance of Venus for the Company, both Venus and
Graff discoveries also bode well for the Company's exploration
efforts on Block 3B/4B, which it operates with a 20% WI and Impact's
Orange Basin Deep Block, both located on trend in the Orange Basin,
South Africa.
The Company has filed an application to extend Block
3B/4B
license and to move into the first extension period. The Company is
also continuing its technical studies on Block 3B/4B with the aim
of maturing exploration prospects for possible future drilling. The
Company and JV Partners are working together to collectively
farmout up to 50% gross WI in Block 3B/4B.
The Company, through its shareholdings in Africa Energy and Eco,
has indirect effective interest in the Gazania-1 exploration well
on Block 2B, offshore South Africa, which is expected to spud in
September 2022. The block has
significant contingent and prospective resources in relatively
shallow water and contains the A-J1 discovery that flowed light
sweet crude oil to surface. Gazania-1 will target two large
prospects seven kilometers up-dip from A-J1.
Africa Energy has a 27.5% participating interest in Block
2B offshore South Africa. The block is operated by a
subsidiary of Eco Atlantic, which holds a 50% participating
interest. Africa Oil has a 19.78% shareholding in Africa Energy and
a 16.2% shareholding in Eco and a resulting 13.6% participating
interest in Block 2B.
The Company has been actively working on the acquisition of
strategic producing assets that are accretive on per share
valuation and cashflow metrics. The Company's focus remains on
buying producing assets offshore West
Africa and the management will consider both operated and
non-operated opportunities as well as oil and natural gas assets.
There is no guarantee that the Company can complete such
transactions.
NOTES
- Prime does not pay dividends to its shareholders, including
Africa Oil, on a fixed pre-determined schedule. Previous number of
dividends and their amounts should not be taken as a guide for
future dividends to be received by Africa Oil. Any dividends
received by Africa Oil from Prime's operating cash flows will be
subject to Prime's capital investment and financing cashflows,
including payments of Prime's RBL principal amortization, which are
subject to semi-annual RBL redeterminations.
- The 50% shareholding in Prime is accounted for using the equity
method and presented as an investment in joint venture in the
Consolidated Balance Sheet. Africa Oil's 50% share of Prime's net
profit or loss will be shown in the Consolidated Statements of Net
Income and Comprehensive Income. Any dividends received by Africa
Oil from Prime are recorded as cash flow from investing activities.
The guidance presented here is for information only.
- Aggregate oil equivalent production data comprised of light and
medium crude oil and conventional natural gas production net to
Prime's W.I. in Agbami, Akpo and Egina fields. These production
rates only include sold gas volumes and not those volumes used for
fuel, reinjected or flared.
- Net entitlement production is calculated using the economic
interest methodology and includes cost recovery oil, tax oil and
profit oil and is different from working interest production that
is calculated based on project volumes multiplied by Prime's
effective working interest in each license.
- Q2 2021 comparative figures have been revised from those
previously reported to ensure comparability and consistency of
calculation as a result of a change in the conversion factor (to
6.0 Mcf:1bbl from 5.8 Mcf:1bbl) used in converting gas production
to barrels oil equivalent.
- Definitions and reconciliations to the non-GAAP measures are
provided on page 11 of the MD&A.
- Earnings Before Interest, Tax, Impairment, Depreciation,
Amortization and Exploration Expenses ("EBITDAX") is not a
generally accepted accounting measure under International Financial
Reporting Standards ("IFRS") and does not have any standardized
meaning prescribed by IFRS and, therefore, may not be comparable
with definitions of EBITDAX that may be used by other public
companies. This is used by management as a performance measure to
understand the financial performance from Prime's business
operations without including the effects of the capital structure,
tax rates, DD&A, impairment and exploration
expenses. Non-IFRS measures should not be considered in
isolation or as a substitute for measures prepared in accordance
with IFRS. A reconciliation from total profit (a GAAP measure) to
EBITDAX (a non-GAAP measure) can be found on page 13 of the
MD&A.
- Q2 2021 comparative figures have been revised to ensure
compatibility and consistency of calculation as a result of a
change in the classification of items between cash generated from
operating activities, cash used in investing activities and cash
used in financing activities.
- Q2 2021 comparative figures have been revised to ensure
compatibility and consistency of calculation. Royalties were
previously recognized net in Prime's income statement and are now
presented gross in both revenue and cost of sales.
- All dollar amounts are in United
States dollars unless otherwise indicated.
Management Conference Call
Senior management will hold a conference call to discuss the
results on Thursday, August 11, 2022
at 07:00 (ET) / 13:00 (CET). The conference call may be accessed by
dial in or via webcast:
Canada,
Toronto
|
(647)
932-3411
|
North America toll
free
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(800)
715-9871
|
Sweden
|
+46.8.505.246.90
|
Sweden toll
free
|
+46.20.0123749
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UK
|
+44.20.3481.4247
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Conference
ID
|
3651642
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Webcast URL
|
https://onlinexperiences.com/Launch/QReg/ShowUUID=17CD306E-0326-4E5B-8F8C-C28B6D09A5A6
|
Please join the event conference 5-10 minutes prior to the start
time. A recording of the webcast will be available on the Company's
website after the event.
About Africa Oil
Africa Oil Corp. is a Canadian oil and gas company with
producing and development assets in deepwater Nigeria; development assets in Kenya; and an exploration/appraisal portfolio
in Africa and Guyana. The Company is listed on the Toronto
Stock Exchange and on Nasdaq Stockholm under the symbol "AOI".
Additional Information
This information is information that Africa Oil is obliged to
make public pursuant to the EU Market Abuse Regulation and the
Swedish Financial Instruments Trading Act. The information was
submitted for publication, through the agency of the contact
persons set out above, at 8:00 p.m.
ET on August 10, 2022.
Advisory Regarding Oil and Gas Information
The terms boe (barrel of oil equivalent) is used throughout this
press release. Such terms may be misleading, particularly if used
in isolation. Production data are based on a conversion ratio of
six thousand cubic feet per barrel (6 Mcf: 1bbl). This conversion
ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Forward Looking Information
Certain statements and information contained herein constitute
"forward-looking information" (within the meaning of applicable
Canadian securities legislation). Such statements and information
(together, "forward looking statements") relate to future events or
the Company's future performance, business prospects or
opportunities.
All statements other than statements of historical fact may be
forward-looking statements. Statements concerning proven and
probable reserves and resource estimates may also be deemed to
constitute forward-looking statements and reflect conclusions that
are based on certain assumptions that the reserves and resources
can be economically exploited. Any statements that express or
involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or
phrases such as "seek", "anticipate", "plan", "continue",
"estimate", "expect, "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions) are not statements of historical
fact and may be "forward-looking statements". Forward-looking
statements involve known and unknown risks, ongoing uncertainties
and other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements, including statements pertaining to dividend
distributions, share repurchase programs, the 2022 Management
Guidance including production, cashflow from operation and capital
investment estimates, performance of commodity hedges, the results,
schedules and costs of exploratory drilling activity, uninsured
risks, regulatory and fiscal changes, availability of materials and
equipment, unanticipated environmental impacts on operations,
duration of the drilling program, availability of third party
service providers and defects in title. No assurance can be given
that these expectations will prove to be correct and such
forward-looking statements should not be unduly relied upon. The
Company does not intend, and does not assume any obligation, to
update these forward-looking statements, except as required by
applicable laws. These forward-looking statements involve risks and
uncertainties relating to, among other things, changes in
macro-economic conditions and their impact on operations, changes
in oil prices, reservoir and production facility performance,
hedging counterparty contractual performance, results of
exploration and development activities, cost overruns, uninsured
risks, regulatory and fiscal changes, defects in title, claims and
legal proceedings, availability of materials and equipment,
availability of skilled personnel, timeliness of government or
other regulatory approvals, actual performance of facilities, joint
venture partner underperformance, availability of financing on
reasonable terms, availability of third party service providers,
equipment and processes relative to specifications and expectations
and unanticipated environmental, health and safety impacts on
operations. Actual results may differ materially from those
expressed or implied by such forward-looking statements.
SOURCE Africa Oil Corp.